Story by The Wall Street Journal
A major energy company will soon sell U.S. oil abroad without explicit permission from the U.S. government, another sign that the decades-old federal ban on crude exports is crumbling.
BHP Billiton ’s deal to sell about $50 million of ultralight oil from Texas to foreign buyers without formal government approval is likely to be only the first of many such moves as energy companies seek new markets and higher prices for the surge of crude now pumped in the U.S.
Washington has been sharply divided over whether to allow U.S. oil exports, which have been restricted since the Arab oil embargo in the 1970s. Big oil companies including Exxon Mobil Corp. have called for an end to the ban, saying that overseas sales would create U.S. jobs and improve the balance of trade.
But opponents have said they fear that exports would cause gasoline prices to rise in the U.S., hurting consumers and angering voters.
BHP said Tuesday that it had signed an agreement to sell 600,000 barrels of oil that hasn’t gone through the traditional refining process that turns oil into gasoline and other fuels. The company declined to identify the buyers for the ultralight oil, known as condensate. The few similar cargoes that have been exported with government approval have gone to Asia and Europe.
“We took the necessary time to thoroughly examine the issues involved and ensure the processed condensate was eligible for export,” the company said.
The Commerce Department didn’t immediately respond to requests for comment. Department officials there have maintained that there has been no change to U.S. oil export policies.
For nearly 40 years the U.S. has allowed exports of refined fuel, such as gasoline and diesel, but not overseas shipments of oil itself except in rare cases. Even those, including limited crude sales to Canada, have required a special permit from the U.S. Commerce Department.
As The Wall Street Journal reported in June, two Texas energy companies received confidential rulings from the department that allowed them to export sell a lightly processed version condensate even though it hadn’t been handled by a refinery.
Anglo-Australian BHP plans to sell the same kind of oil to Asia even though it doesn’t have a government ruling.
Global oil prices have dropped sharply since late June as companies pump more crude, from Libya to North Dakota. Meanwhile, world-wide demand for fuels is tepid. Lower oil prices translate into cheaper gasoline and diesel, putting money in the pockets of consumers.
But energy companies with substantial investments on the line worry that low crude prices will force some of them to stop drilling. They have grown increasingly eager to circumvent the ban on international sales of U.S. oil and gain access to new markets.
Refiners and other buyers of light oil across Asia are interested in American condensate so they can diversify their supply from the Mideast.
The companies that received special permission from the U.S. government to export minimally processed oil are Enterprise Product Partners LP, a Houston-based pipeline and oil-storage operator, and Pioneer Natural Resources Co. , a Dallas-based oil producer. They used their rulings from the Commerce Department’s Bureau of Industry and Security to ship the first tanker of condensate overseas at the end of July.
BHP sold some ultralight oil from its Eagle Ford fields in South Texas to Enterprise for that first cargo and has participated in some of the pipeline company’s more recent exports, which will approach 4 million barrels by year-end.
In the process, BHP said it learned the rules for lightly processing the ultralight oil, which were spelled out in Enterprise’s ruling from the government.
Other energy and trading companies have applied for private rulings from the federal government, which hasn’t approved any since spring.